To Beat the Law of Large Numbers, Apple Must Expand Its Product Line

[satirev]

I think this is by far the most shocking part of the article, it's based on a misinterpretation of a statistical principle! I wouldn't expect such poor journalism from a major news agency.

Seriously, the article could be used in an intro to statistics class about the abuse of statistics!



In this case, I think that's the only sensible option.

care to explain how the author misrepresented the 'law of large numbers'? Seems to me that he made a precise connection...

 

[jgbr]

I disagree, Apple must not abandon the "school of jobs". IE: do a few things, and do them well.

We don't want apple going of and making lots of product lines and machine as it did just before its fall before.

With also this shareholder talk and changes to some ways they do business such as openness, i worry that Job's ethos will be chucked away too easily and we all know what happens when that does.

People never learn

 

[telecomm]

care to explain how the author misrepresented the 'law of large numbers'? Seems to me that he made a precise connection...

I think xoggyux did a pretty good job in this post.

I think the article is mixing up some concepts here .
The law of large number pretty much says that if you flip a coin, the more times you flip it, the closer the results will be to the "average" number for heads (or tails). For instance, if you only flip once, you might get 100% head, flip 5 times and you might get 66% head, but if you flip a million times you are going to get 50/50 as for large number of tries, the observed value approaches to the "average."

All the resources necessary to put the pieces together are, ironically, linked in the Macrumors article. The law doesn't say what's reported in the NYT article, which says "the law states that a variable will revert to a mean over a large sample of results".

This is not true!

The law states roughly that the average value in an increasingly large sample will, over time, tend to approach the true average. There's a crucial difference between making a claim about the behaviour of the value of a variable (stock price, in this case), and the behaviour of averages of a sample of such values. This is the content of the second sentence in the linked Wikipedia article.

In this case, a correct application of the theorem would say something like "if you keep taking the average of the stock prices over an extended period of time, the longer you keep calculating average stock prices, the closer that average will get to the true stock price [whatever that is!]."

I can't see how that supports the claims in the article.

 

[satirev]

I think xoggyux did a pretty good job in this post.


All the resources necessary to put the pieces together are, ironically, linked in the Macrumors article. The law doesn't say what's reported in the NYT article, which says "the law states that a variable will revert to a mean over a large sample of results".

This is not true!

The law states roughly that the average value in an increasingly large sample will, over time, tend to approach the true average. There's a crucial difference between making a claim about the behaviour of the value of a variable (stock price, in this case), and the behaviour of averages of a sample of such values. This is the content of the second sentence in the linked Wikipedia article.

In this case, a correct application of the theorem would say something like "if you keep taking the average of the stock prices over an extended period of time, the longer you keep calculating average stock prices, the closer that average will get to the true stock price [whatever that is!]."

I can't see how that supports the claims in the article.

you're trying to compare the statistical definition to a finance example, which you cant. its a little bit different in finance terms.

"it suggests that as a company grows, its chances of sustaining a large percentage in growth diminish. This is because as a company continues to expand, it must grow more and more just to maintain a constant percentage of growth."

Read more: http://www.investopedia.com/terms/l/lawoflargenumbers.asp#ixzz1nNMF4yKT

its pretty simple actually, and the article does a great job of explaining it. Essentially it is easy for a brand new company with brand new products to have a high growth rate. over time, as that company expands, it becomes harder to continue that same rate of growth because of its size. In apples case, it will be especially harder, seeing as how it is now larger than exxon mobile with a market cap of over 500 billion. Additionally, the market is starting to become saturated with its high quality products that dont need to be replaced every year (except for the fan boys that will replace every year with the newest model)

 

[iBug2]

you're trying to compare the statistical definition to a finance example, which you cant. its a little bit different in finance terms.

"it suggests that as a company grows, its chances of sustaining a large percentage in growth diminish. This is because as a company continues to expand, it must grow more and more just to maintain a constant percentage of growth."

Read more: http://www.investopedia.com/terms/l/lawoflargenumbers.asp#ixzz1nNMF4yKT

its pretty simple actually, and the article does a great job of explaining it. Essentially it is easy for a brand new company with brand new products to have a high growth rate. over time, as that company expands, it becomes harder to continue that same rate of growth because of its size. In apples case, it will be especially harder, seeing as how it is now larger than exxon mobile with a market cap of over 500 billion. Additionally, the market is starting to become saturated with its high quality products that dont need to be replaced every year (except for the fan boys that will replace every year with the newest model)

Fanboys are not on average richer than other Apple consumers. So I'd say replacing an Apple product every year does have nothing to do with fanboyism. Any Apple consumer has an equal chance of doing it most probably.

 

[satirev]

Fanboys are not on average richer than other Apple consumers. So I'd say replacing an Apple product every year does have nothing to do with fanboyism. Any Apple consumer has an equal chance of doing it most probably.

that may be, but my point still stands, he applied the law correctly, and rightly so, it makes perfect sense.

 

[telecomm]

you're trying to compare the statistical definition to a finance example, which you cant. its a little bit different in finance terms.

...uh, that's sort of the point I'm trying to make. More accurately, you can apply statistics to finance, but it won't necessarily produce the results you want to claim it does.

All the article is supposing is this: As a company grows larger, it's growth will inevitably slow.

OK, now connect that to the law of large numbers.

 

[satirev]

...uh, that's sort of the point I'm trying to make. More accurately, you can apply statistics to finance, but it won't necessarily produce the results you want to claim it does.

All the article is supposing is this: As a company grows larger, it's growth will inevitably slow.

OK, now connect that to the law of large numbers.

I already did...again, see here

http://www.investopedia.com/terms/l/lawoflargenumbers.asp#axzz1nNHAIiXP

law of large numbers can be applied to multiple things...statistics...finance..etc...

This article is applying it as a financial concept...not a statistical one.

so stop thinking about it statistically because the article has nothing to do with statistics lol...

 

[wulf]

wow

like if running a business is just influenced by this one law! There is no business in the world that can run by this law ... On the other hand, it's a good explanation why some success stories came to an end. Let's hope Apple will prove this law to be wrong. I don't want Apple to start releasing irrelavant products.

 

[telecomm]

I already did...again, see here

http://www.investopedia.com/terms/l/lawoflargenumbers.asp#axzz1nNHAIiXP

This confirms that Investopedia is probably not the best place to learn statistics. Anyway, I'm giving up now.

...stop thinking about it statistically because the article has nothing to do with statistics lol...

Here, at least, we agree!

 

[cire]

the world has a finite amount of money, and for a billion dollars to be in reserve, then that billion dollars has to not be available to anyone else, say, people who would need it more than Apple needs it.
you can't have rich without poor, you can't have capitalist America without immense eastern poverty.

Incorrect. When Apple has 100 Billion in cash and marketable securities it is not the same as if they had there wealth stashed in a bed. It is out in the world continuing to create more wealth. The richness of America is not the cause of the modern developing and underdeveloped world's poverty. The largest cause is the third world's dependence upon socialist memes like the ones you have expressed.

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Yes!
If you spend money, then you have less money, whether you could afford it or not.
if Apple has our money, then we have less.
Does that not make sense Jack?

You money may decrease, but your wealth does not. And if the product increases your productivity, then you end up with even more income to compensate or you spend less on other needs.

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if Apple makes a profit from selling you something, then that profit goes from being your money, to Apple's money. You get your thing, Apple gets it's money, Apple gets the better deal as it sold it to you for more than it cost to make and ship (that's what profit is).
So if Apple does this to millions of people, then keeps that money for itself and doesn't spend it, then that money isn't being spent and circulated, it's waiting in a pile until Apple needs it.

here's the analogy for the world.
(because there is a finite amount of money, which, Jack, is relevant when such large numbers are being thrown around)
So if the world has for example $100, and Apple keeps $1 of that, not ever spending it, then the world only has $99 to go round.
People are poorer, when other people become richer!

Apple doesn't keep the $1 dollar in a cookie jar. It puts it in a bank and then that bank loans it to some family trying to buy a house. Did you ever watch Its A Wonderful Life? The money doesn't just stop circulating. Also, what would it cost you to make an iPad for yourself? It would cost MUCH more than what Apple charges (in terms of time and resources). From Apple's economies of scale it takes a profit and provided you with a good that increases your non-cash wealth.

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The world's wealth can't increase Jack.

as an aside I really wish you wouldn't associate Hugh Laurie with your right wing capitalist dillusions.

Incorrect. The world's wealth increases all the time:

1. We have ten people with $10 each.

2. I dig a gold bar out of the ground worth $10.

3. My wealth is now $20.

4. I sell it to one of the 10 for $10.
My wealth is still $20
Their wealth is still $10.

I made a profit and nobody lost anything and the world's wealth increased.

Socialists should learn economics.

 

[meatballs]

I would like to see them make an effort to take on Windows 8, which will have its own app store btw, by offering OS X for PC. Thunderbolt is coming to the PC in 2012 so everything will be in place. And no, they wouldn't have to write and support drivers. As with Windows that's the job of the hardware manufacturers.

 

[Reach]

That's not what the law of large numbers suggests. Kind of sad that the New York Times is so badly misusing that term.

Apple's numbers are amazing.

Agreed, it confused the good out of the article for me.

 

[gnasher729]

care to explain how the author misrepresented the 'law of large numbers'? Seems to me that he made a precise connection...

Bernoulli's "Law of large numbers" says that if a random experiment is repeated over and over again, the average outcome will eventually come closer and closer to the expected outcome of the experiment.

An application of the "Law of large numbers" would be the observation that if you ask two or three Mac users how long their Mac lasted, the result may vary a lot, but if you ask three million users, you'll get a very accurate result.

But what has this to do with Apple's financial situation?

 

[Reach]

I already did...again, see here

http://www.investopedia.com/terms/l/lawoflargenumbers.asp#axzz1nNHAIiXP

law of large numbers can be applied to multiple things...statistics...finance..etc...

This article is applying it as a financial concept...not a statistical one.

so stop thinking about it statistically because the article has nothing to do with statistics lol...

Telecomm is right here, it doesn't make much sense to use the law of large numbers to explain why growth over time will slow in a particular company.

Investors may have "tweaked" (midunderstood?) the concept so that they now have their own "law of large numbers", but it's not obviously connected to the original concept as far as I can see...

 

[TrollToddington]

Incorrect. The world's wealth increases all the time:

1. We have ten people with $10 each.

2. I dig a gold bar out of the ground worth $10.

3. My wealth is now $20.

4. I sell it to one of the 10 for $10.
My wealth is still $20
Their wealth is still $10.

I made a profit and nobody lost anything and the world's wealth increased.

Socialists should learn economics.

This would have been true if there had been endless resources. As we know, Earth possesses limited resources so that you can't end up having more money and wealth endlessly. Of course, if we take into account that U.S.A can print more dollars any day then yes, you can increase your wealth inside the USA forever as long as the dollar is backed up by a working economy. In our country money is backed up by gold reservers and if we print more money their value will diminish (a.k.a. inflation) - you'll have to spend more on the same things. In addition to that, the relative price of the dollar has taken a big dive for the last 10 years. I'd rather invest in Chinese yuans.

Regarding the article, I think Apple will try to enter other markets, not necessarily connected with computers. However, the balloon will pop up at a certain time, that's another law in economics. They won't grow forever. Imagine an Apple product in every conceivable market niche, how will they expand from then on? They can: 1) increase price or 2) try to sell computers to the Martians?

 

[DoubleUK]

A new product?

What about STOVES!

Yes, they've already set up a secret productionline in China!

 

[ownamac]

Wasn't it rumored that Jobs said that a new product, unlike anything else before was being developed? Maybe he was referring to the TV project, or maybe it was some kind of new computer? Either way, I'm really looking forward to what Apple is going to bring to the table. With this much cash on hand, their next product better be good

According to Forbes, at this past week's annual Apple stock holders meeting Tim Cook told investors "You can be assured we are working as hard as ever this year to deliver an incredible year and some products that will blow your mind."

Whatever he's referring to might include something as yet unanticipated and could add significantly to 2012 revenue numbers.

 

[Invisible Elf]

Socialists should learn economics.

I agree with most of your points, but saying things like that just makes you seem like a douche

 

[576316]

The only reason Apple is the most wealthiest technology company in the world is because their prices are extortionately high. Almost to the point of being a rip off. But we love Apple products, they're like Alessi, so we keep buying them.

 

[borgqueenx]

To Beat the Law of Large Numbers, Apple Must Expand Its Product Line

Meaning.....4 storage models of ipad 3?
128gb here i commeeeeeee

 

[Adidas Addict]

I think the Apple TV set idea is a non starter

 

[flottenheimer]

Another way for Apple to grow is distribution. Outside The States (300 million people) it leaves a lot to be desired.

Theres still plenty of room in Europe (500 million people).
And then there's China: With more than 1.3 billion people (and only 5 Apple Stores) it clearly represents a HUGE opportunity.

 

[Sam0r]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A406 Safari/7534.48.3)

For starters they need to lower the amount of profit they make from their products. An iPad considering its spec is nowhere near worth it's price, I would buy one in an instant if they shaved 1/3 off the price. Secondly, I fear apple are trying to remove themselves from the computer market. They're trying to turn my iMac and MacBook pro into an iPad and I REALLY dont like it. I know all that stuff doesn't need to be used, and I don't use it, but I just hate the fact that they're trying to make things easier for me/us. It's not working! I feel like I'm being dragged backwards!

 

[Adidas Addict]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A406 Safari/7534.48.3)

For starters they need to lower the amount of profit they make from their products. An iPad considering its spec is nowhere near worth it's price, I would buy one in an instant if they shaved 1/3 off the price. Secondly, I fear apple are trying to remove themselves from the computer market. They're trying to turn my iMac and MacBook pro into an iPad and I REALLY dont like it. I know all that stuff doesn't need to be used, and I don't use it, but I just hate the fact that they're trying to make things easier for me/us. It's not working! I feel like I'm being dragged backwards!

Apple are all about high profit margin, it serves them well.